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What Will This Year’s Super Bowl Indicator Tell Us? 2017

The Super Bowl indicator claims that the Dow Jones Industrials Average (DJIA) rises for full years when the Super Bowl winner comes from the original National Football League, but when an original American Football League team wins, the DJIA falls. Expansion teams count for their conference. We would be the first to admit that this indicator has no connection to the stock market so the relationship is random, but there is also no arguing that the Dow has performed better when NFC teams have won over the past 50 years.

A simpler way to look at the Super Bowl indicator is to look at the average gain for the Dow when the NFC has won versus the AFC—and ignore the history of the franchises. This similar set of criteria has produced an average price return of 10.9% when the NFC has won, compared with only 4.3% with an AFC winner. An NFC winner has produced a positive year 82% of the time while the Dow has been up only 61% of the time when the winner came from the AFC.

Interestingly, the New England Patriots have an even worse record for markets than the AFC as a whole, as the chart below shows. Of the eight previous times the Patriots have played in the Super Bowl, the Dow has been up for the full year an even 50% of the time, with an average gain of just 0.3%. Years where they won fared the worst, seeing an average loss of 4.1%.

Those who love Tom Brady will be glad to see him starting in his record seventh Super Bowl, but those who don’t will be interested to note that markets have actually fallen for the full year 67% of the time (four out of six) that he has started in the big game, with an average loss of 7.2%. However, to be fair two of those years were extreme outliers, with 2002 seeing the largest decline in the Dow (-17%) since 1977, and 2008 seeing an even larger drop of -34%, the largest since the Great Depression. Even the most ardent Patriots detractors can’t realistically fault Tom Brady or Bill Belichick for the Financial Crisis.

So what does this mean for the upcoming Super Bowl? Per Ryan Detrick, Senior Market Strategist, “It means investors should be rooting for the NFC’s Atlanta Falcons (though LPL employees in the Boston home office may disagree). As an expansion team in the NFC, an Atlanta victory would point toward a positive and above-average year for the Dow, while the Patriots, an original AFL team that morphed into the AFC, would signal a down year and below-average returns. Whatever happens, hopefully everyone enjoys their Super Bowl parties and are able to wake up for work on Monday morning.”

IMPORTANT DISCLOSURES

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.

The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices.” This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

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